Telstra quells 3G hype

By Phil Boeyen, ShareChat Business News Editor

Thursday 11th January 2001

Telstra (NZSE: TLS) is downplaying the importance of the much-vaunted 3G radio spectrum, claiming it does not allow the telco to do anything that existing spectrum cannot do.

Speaking at a US conference today Telstra boss Ziggy Switkowski warned markets not to get over-hyped about 3G.

"The fact is that there is no proven business model for streaming high-speed video services on 3G currently. Applications like this are just not economic.

"Our head of technology felt like a lone voice when saying this on an international roadshow recently, yet I note that DoCoMo has more recently come out and made statements to the same effect."

Mr Switkowski says Telstra is highly likely to bid for 3G spectrum, but it will just provide extra capacity.

"At least in the medium term, Telstra sees 2.5G providing all the data functionality required by customers."

"2.5G will also solve many of the problems people have with current clunky and slow circuit switched WAP applications - making it a much more compelling service."

Mr Switkowski says the competitive mobiles market in Australia is in transition and the cost of competition has impacted the company's mobiles revenue growth and cost line in the current financial year.

"While there are a couple of years left of strong voice-only handset growth, we are moving to the first phase of demand for real data services."

"We are establishing Telstra as the leader in wireless data in Australia," he says.

Telstra's claims on the wireless leadership comes amid a confusing battle for Australia's second biggest telco, Cable & Wirelss Optus.

Although Telecom New Zealand has declared its interest in acquiring the mobile assets of C&W Optus, the price may be too rich, especially given its recent purchase of Australia's third-biggest telco, AAPT.

Analysts - and the Telecom share price - appear to be wavering between whether the increased mobile stake would give Telecom serious debt indigestion or whether it would be an overall positive move.

British mobile giant Vodafone is reportedly the keenest bidder for the Optus mobile stake, but this has raised competition concerns as it would give Vodafone a huge market share.

C&W Optus has said little about any potential bids except to confirm that it has received a number of expressions of interest.

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